Proposed use tax ‘levels the playing field’ for online purchases
In the General Municipal Election on April 7, Ozark County voters will be asked to decide an important question: Should Ozark County impose a “local use tax” allowing the state to collect and distribute sales tax to the county from online and mail-order catalog purchases?
At their weekly meeting Monday, the Ozark County Commissioners addressed some of the rumors and misinformation circulating in the community, hoping to clarify questions on the tax. The commissioners say they want to assure voters that the use tax is not a “double tax.” They say that passing a local use tax simply means that Ozark County would be allowed to collect sales tax on items purchased online and from catalogs distributed by vendors that have no physical presence in the state.
“This would just level the playing field,” said Presiding Commissioner John Turner. “I don’t consider this a new tax. It’s just a tax that would be paid if we bought things physically in the county.”
Affect on purchases, county budget
If approved, the use tax would mirror the existing county sales tax of 2.5 percent. The use tax would be added to the state sales tax of 4.225 percent that is currently being paid by consumers who order online or through catalogs.
To demonstrate how the tax would affect consumers, residents can consider this scenario.
If a person made a $100 purchase today at a business outside the Gainesville city limits, such as the gift shops at Rockbridge or Dawt Mill, the consumer would pay $106.50. This total amount includes the $100 purchase price plus $4 in state sales tax and $2.50 in county sales tax.
If the same person bought $100 worth of goods from an online retailer, such as Amazon, they would now only pay $104, the $100 purchase price and the $4 state sales tax. But because no county sales tax can currently be applied to the online purchase, the purchaser would not pay – and Ozark County would not receive – the $2.50 county sales tax that would be paid at the gift shops.
If the local use tax is passed, the two purchases would be identical at $106.50, and Ozark County would receive tax from both purchases.
Operating without a local use tax on online purchases effectively prevents the county from collecting sales tax on those purchases that would “help us keep deputies, the ambulance and road and bridge,” said Turner.
The current situation also gives a sales tax advantage to non-Missouri vendors. Adopting the local use tax would eliminate that advantage.
“This levels the playing field,” said Turner. “We need to recoup those [county] taxes you would have to pay at Town & Country, the [Gainesville] Building Supply or Dollar General.”
“[Not having a use tax] is not fair to our local businesses,” said Western Commissioner Greg Donley. “It’s a fairness thing.”
The commissioners all accept that it is easier for many people in Ozark County to make purchases from online vendors because of the time and distance to travel to many major retailers – and they know that number is growing.
The commissioners say they want to clarify that the passage of the local use tax would only affect the county sales tax. Each of the three municipalities in Ozark County – Gainesville, Bakersfield and Theodosia – would also have to ask city voters to pass a local use tax for their city or village in order for the tax to be charged and collected for those municipalities.
Missouri is one of only two states without the ‘Wayfair tax’
Online sales tax collection has been a hotly debated subject for the past few years.
Currently, Missouri collects a state sales tax from online and catalog purchases if the seller has a physical presence in the state. But according to a 2018 US Supreme Court decision regarding what is commonly called the “Wayfair tax,” states can enact laws enabling the collection of sales taxes from e-commerce companies that do not have a physical presence in the state.
According to taxfoundation.org, as of September 2019, of the 45 states with a sales tax, Missouri and Florida were the only states that have not enacted the Wayfair tax. This is despite attempts by the Missouri House of Representatives and Senate to enact the law.
State Sen. Mike Cunningham and Rep. Karla Eslinger both addressed the Wayfair tax in their weekly columns in the Jan. 15 edition of the Times. (See “2020 priorities: workforce preparation, online sales tax and ‘gray box’ gaming”’by Cunningham and “Looking for a ‘Wayfair fix’: a way to tax ‘remote sales’” by Eslinger).
Both articles can be found at ozarkcountytimes.com. Use the search bar to search for “Wayfair.”
“There are also a lot of loopholes with third-party vendors,” said Donley. “There are a lot of third- party vendors [selling] through companies like Amazon that are exempt from collecting sales tax.” Donley hopes the loophole will soon be fixed by the Missouri legislature.
The commissioners emphasized the need for voters to pass the use tax. If the voters don’t approve the tax, the consequences could be dire, said Turner.
“What this comes down to is, if we don’t get [the tax passed], we will eventually have to cut back on services,” said Turner. “We don’t want to do that.”